The start of the year is a signal to begin your tax return in the Netherlands. Expatica explains Dutch income tax, tax refunds and how to file a Dutch tax return.
The start of the year doesn’t just bring New Year’s resolutions, but also the need to settle your income tax return. In the Netherlands, the fiscal year runs from 1 January to 31 December, and around the first week of February, the tax authorities start sending invitations to submit your income tax return.
In general, the tax return has to be submitted before 1 May. However, if you submit your return before 1 April, the tax authorities will assess your return before 1 July.
If you receive the tax form much later than February, a different submission date will be applicable. This date will be stated on the form.
Types of Dutch tax return
The Dutch tax authority issues five different types of Dutch tax returns forms.
> P form: Most common tax form for those who are in a regular employment situation and have resided in the Netherlands the entire year.
> M form: For those who arrived in the Netherlands during the year and became a resident or for those who were a resident and left the Netherlands during the year.
> C form: For non-residents who have had Dutch-sourced income during the year.
> W form: For those who have had income from self-employment.
> F form: For relatives of a deceased person.
Calculating your Dutch income tax
If you work in an employment situation, payroll tax is withheld from your salary.
This means that if you work in an employment situation the full year, you will most likely not have to pay any additional Dutch income tax. If you are in such a situation, you will probably not even receive an invitation from the Dutch tax authority to file a tax declaration in the Netherlands.
If you haven’t received an invitation to submit your Dutch tax return, you can request the Dutch tax authority to issue a tax form on your behalf. If you know you have to report Dutch income tax to the authorities that hasn’t yet been taxed, you are obliged to request a form and submit your Dutch tax return. On the other hand, if you had tax deductible expenses, you may want to submit your return to get a tax refund in the Netherlands.
However, even in case you do not have anything to declare other than your regular employment income, it can still be worthwhile to submit a Dutch tax return. For instance, if you and your partner both work and have a child under the age of 12, you may be entitled to the income-depending combination tax credit, which rises depending on your income up to a maximum of €2,835 in 2019.
How to file your Dutch tax return
If you do not use the service of a financial advisor, you can also file your Dutch tax return yourself. Your tax declaration has to be submitted electronically, for which you must first download the software program from the website www.belastingdienst.nl. Once completed, you can then submit your Dutch tax return electronically by using your DigiD. In case you do not yet have a DigiD, you can you request one through www.digid.nl.
Filing US taxes from the Netherlands
Despite the fact that every US citizen and green card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from the Netherlands, contact Taxes for Expats and see our Guide to taxes for American expats.
Paying Dutch income tax
After you have submitted your tax return in the Netherlands, you will receive a preliminary assessment from the Dutch tax authority. In cases where you were invited by the tax authorities to submit your return before 1 May, and you filed your return before 1 April, you will receive a notice after 10 to 12 weeks about paying Dutch income tax. If your tax return was submitted with either a C or an M form, it may take up to 24 weeks or more.
Initially you will receive a preliminary assessment from the tax authorities, which is based on your tax return but without being checked by the Dutch tax authority. Once they have checked the return, a final assessment on your Dutch income tax will follow.
Filing your first year’s return with an M form
If you came to live or work in the Netherlands in the course of the year or left the Netherlands in the course of the year, then filing a Dutch tax return as an expat may well be advantageous for you.
Dutch income tax and wage is calculated on the basis of three progressive tax brackets (reducing to two in 2021). The higher your income, the higher your tax bracket. The wage tax that is withheld at source from your salary is levied on the basis of your estimated annual salary, which is then calculated back to a monthly amount.
Therefore, if you have only worked for half a year in the Netherlands, your gross annual salary will be lower than estimated. The amount of wage tax withheld will therefore be too high. A Dutch tax return can result in a rebate of this wage tax.
Retrospective Dutch income tax
Should you have just found out you were entitled to a rebate for previous years but hadn’t filed a return, you can do so retrospectively for five years. So, for example, it is still possible to file your 2015 tax returns until 31 December 2019.
In short, it can be worthwhile to consider filing a Dutch tax return and pay Dutch income taxes, even if you have not received an invitation yet.
Tax return extensions
If you cannot meet the deadline for filing the return, you can request for an extension until 1 September. If you use the help of a registered tax advisor, a time extension can be arranged by your advisor under their time extension ruling with the tax authorities. Under this ruling, the time extension can be until 1 May the following year.
Fines for late tax returns
If the tax return is not filed before the deadline, the tax authorities will send a notice that you didn’t file yet. This is not as yet an ‘official’ warning, but shouldn’t be ignored. If the tax return is still not filed, the tax authorities will send a formal reminder, giving you another 10 working days to file the tax return. If you fail to do so, you’ll receive a fine.
The standard fine for filing late is €226. Filing late for the second time will lead to a fine of €984 (20% of the maximum) and for the third time the fine will go up to a maximum of €4,920.
Fines for omissions on tax returns
Besides fines for filing late, there are also fines for providing wrong or incomplete information in the tax return. This fine can go up to 100% of the tax you omitted to pay due to the error(s) in the declaration. The percentage depends on the reason why the mistake was made.
Some other examples of possible fines are:
- Not declaring savings and investments: 100% or even 300% of the tax you omitted to pay due to the error(s) in the declaration.
- Wrong kilometre registration for a company car: up to €4,920.
- Providing the requested information for a tax allowance too late or not at all (for example child care): up to €4,920.
- If the wrong information has been provided to the tax authorities on purpose to claim a high tax allowance, the maximum fine will be 100% of the amount which has to be paid back to the tax authorities without an absolute maximum.
It is always possible to contend a fine which is issued by the tax authorities. This must be done within six weeks from the date of the tax assessment stating the fine.
Arjan Enneman, Managing Director Expatax BV and tax expert on Expatica’s Ask-the-expert.